NOTE E - COMMON STOCK AND STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

Notes

NOTE E - COMMON STOCK AND STOCK-BASED COMPENSATION

NOTE E — COMMON STOCK AND STOCK-BASED COMPENSATION

COMMON STOCK

On March 25, 2021, we issued 203,000 restricted shares of our common stock for cash proceeds of $609 pursuant to the exercise of common stock purchase options by various employees. On October 28, 2021, we issued 486,000 restricted shares of our common stock for cash proceeds of $1,458 pursuant to the exercise of common stock purchase options by an employee and a former employee. On December 2, 2020, certain officers and directors and their family members exercised options to purchase 1,359,372 restricted shares of our common stock by reducing deferred compensation payable to officers and directors of $18,687.

STOCK-BASED COMPENSATION

We do not have a written employee stock option plan. We have historically generally granted employee stock options with an exercise price equal to the market price of our stock at the date of grant, a contractual term of

ten years, and a vesting period of three years ratably on the first, second and third anniversaries of the date of grant (with limited exceptions).

All employee stock options granted during 2021 and 2020 were nonqualified stock options. Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant).    

The following table summarizes our employee stock option activity for the years ended December 31, 2021 and 2020:

Schedule of Employee Stock Option Activity
	Options	Weighted average exercise price	Weighted average remaining contractual life (years)	Aggregate intrinsic value
Options outstanding, December 31, 2019	2,318,835	$ 0.010	6.42
Options granted during the year	2,040,500	0.015
Options exercised during the year	(1,359,372)	0.014
Options expired during the year	(10,000)	0.019
Options outstanding, December 31, 2020	2,989,963	$ 0.012	7.19
Options granted during the year	90,000	0.240
Options exercised during the year	(689,000)	0.003
Options forfeited during the year	(48,334)	0.003
Options outstanding, December 31, 2021	2,342,629	$ 0.023	7.20	$1,522,619
Options exercisable, December 31, 2021	1,411,633	$ 0.015	6.62	$ 896,776

The following table summarizes our non-vested employee stock option activity for years ended December 31, 2021 and 2020:

	2021	2020
Non-vested options outstanding, beginning of year	1,262,500	690,670
Options granted during the year	90,000	2,040,500
Options vested during the year	(421,504)	(1,458,670)
Non-vested options forfeited during the year	-	(10,000)
Non-vested options outstanding, end of year	930,996	1,262,500

The fair values of the granted options are estimated at the date of grant using the Black-Scholes option pricing model. In addition to the exercise and grant date prices of the options, certain weighted average assumptions that were used to estimate the fair value of stock option grants in the respective periods are listed in the table below:

	2021	2020
Risk free interest rate	0.78 %	0.33%-0.89%
Expected lives (in years)	5	5
Expected volatility	289%	208%-231%
Dividend yield	0%	0%

The following table shows total stock options compensation expense included in the Consolidated Statements of Operations and the effect on basic and diluted earnings per share for the years ended December 31:

	2021	2020
Stock options compensation	$8,790	$24,595
Impact on income per share:
Basic and diluted	$-	$-

During the year 2021, 90,000 employee stock options were granted, of which 45,000 will vest one-third on each annual anniversary of the grant date, and 45,000 will vest one-third on each annual anniversary beginning after four years of the grant date, resulting in $2,934 of stock options compensation. Stock options compensation of $5,856 recorded in the year 2021 was related to options that were granted in prior years. Additionally, 48,334 employee stock options were forfeited that were related to options granted in prior years. At December 31, 2021 there was $21,376 of unrecognized stock options compensation that is expected to be recognized as an expense over a weighted-average period of 2.2 years.

Common Stock Purchase Warrants – A summary of common stock purchase warrant activity for the years ended December 31, 2021 and 2020 follows:

Outstanding common stock purchase warrants issued to non-employees outstanding at December 31, 2021 are as follows:

Number of shares	Exercise price	Expiration year
250,000	$0.003	2023
40,000	$0.010	2024

The following table summarizes our common stock purchase warrant activity for the years ended December 31:

	2021	Weighted Average Exercise Price	2020	Weighted Average Exercise Price
Warrants outstanding, beginning of year	290,000	$0.004	290,000	$0.004
Warrants granted during the year	-	-	100,000	0.004
Warrants exercised during the year	-	-	(100,000)	(0.004)
Warrants outstanding, end of year	290,000	$0.004	290,000	$ 0.004

Of the 290,000 warrants outstanding at December 31, 2021, 250,000 were issued as equity compensation for consulting services. No warrants were granted during the year ended December 31, 2021. In June 2020, we granted 100,000 warrants for the purchase of shares of our common stock with and exercise price of $.004 per share and an expiration date in June 2021. The warrants were valued using Black-Scholes option pricing model on the respective date of issuance using the following assumptions: a) risk free rate of .38%; b) term of 1 year and c) expected volatility of 392.22%. The fair value of the warrants was determined to be $1,958, which was recognized as warrant expense. These warrants vested immediately upon grant (June 2, 2020) and will expire in one year from the date of grant. In August 2020, these 100,000 warrants were exercised for which we received proceeds of $400.